Blog:Currency Affairs

The troubles that may face wine producers attempting to import and then sell into the US market were alluded to by the boss of the world's largest wine company, Constellation Wines, as it announced its latest quarterly results earlier this week.

Stephen Millar, who became head of Constellation's wine unit after the takeover of Australia's BRL Hardy in March 2003, said: "The wine industry is going through a challenging time, and it's tougher than it has been."

Australian winemakers selling in the US in particular are having to reassess pricing and strategies due to the surging Australian currency. The Australian dollar was the best performing major currency in 2003 rising 34% against the US dollar and ending the year at around 75 cents.

Australian winemakers now face a choice. Either they trim margins to maintain volumes and market share, or risk both by pushing through price increases in the US to maintain profitiability.

France, Italy and Australia accounted for 83% of the US$2.15 billion of still table wine the US imported in the first 10 months of 2003, according to the National Association of Beverage Importers. And it is producers from these countries who must make the toughest decisions, as the US has proved a lucrative balance to their declining home markets.

There was a useful article in the Sydney Morning Herald today summarising some of the probelms ahead. To see it follow the link below.